European Union finance ministers will hold an emergency meeting Sunday to discuss measures to stabilize the single European currency. German Chancellor Angela Merkel wants to send a clear signal to currency speculators.
Treaty changes are one idea for tightening up on debt
At an emergency Eurozone summit in Brussels overnight, the leaders of the 16 states which use the euro called for a permanent rescue mechanism for members that run the risk of default on their debts.
"Taking into account the exceptional circumstances, the European Commission will propose a European stabilization mechanism to preserve financial stability in Europe," the president of the EU, Herman Van Rompuy said in a statement released in the early hours of Saturday morning.
The European Union's executive body, the European Commission, will propose plans to create a "European stabilization mechanism" on Sunday morning. EU finance ministers are to meet on Sunday afternoon to discuss the proposals.
German Chancellor Angela Merkel said the move will send "a very clear signal" to market speculators, by creating a common fund to support economies in difficulty.
Germany's Chancellor Merkel wants financial regulation against currency speculators
"We will take communal measures to protect the euro against speculation," Merkel said early Saturday morning.
Merkel, who presides over Europe's largest economy, has said in the past that she wants to pursue changes to basic European treaties, in an effort to bring national deficits under control.
Germany is in favor of a tougher line against countries that borrow too much, with possible sanctions including the suspension of EU voting rights and the loss of certain subsidies.
However, Austrian Chancellor Werner Faymann said it was unrealistic to think about treaty changes so soon after the Lisbon Treaty was brought into force in December 2009. Faymann also said he could "not imagine withdrawing voting rights entirely."
Eurozone finance ministers agreed last Sunday on a 110 billion euro ($140 billion dollar) rescue loan for Greece.
However, the value of the euro has fallen dramatically since then, with fears that countries such as Spain and Portugal might also need rescuing.
Austrian Chancellor Werner Faymann believes treaty changes are unrealistic
"The Greek crisis shows how interdependent all European Union members are," Finnish prime minister, Matti Vanhanen, said ahead of the summit. "Lessons must be learned."
Currently, the EU Commission has launched formal procedures against 13 of the 16 eurozone members, including Germany, all of whom have failed to stick to the bloc's prescribed limits for budget deficits and national debts.
Editor: Mark Hallam